ChrysCap seeks more for Hexaware shares

MUMBAI: ChrysCapital, the biggest India-focused private equity investor with a 9.6% stake in Hexaware Technologies , has sought a better price to sell shares in the country's ninth largest IT exporter being acquired by Baring Asia. This comes even as efforts are underway to broker a sale of ChrysCapital shares in open market trade to be picked up by the acquirer, said people directly aware of the matter.

On Friday, Baring Asia, another private equity fund, struck a deal with Hexaware promoter Atul Nishar and long-term investor General Atlantic Partners to buy a 42% stake at a price between Rs 126 and Rs 135 per share. The mandatory open offer to minority shareholders for an additional 26% would happen at Rs 135 per share. However, Baring would pay the two outgoing shareholders at the higher band if it gets 50% stake in Hexaware.

The ChrysCapital stake, held through the foreign institutional investor (FII) route, is crucial for Baring Asia to have a controlling ownership. But Hexaware's third largest shareholder , and some other minority investors too, are expecting at least 8-10 % upside on the open offer price to tender their shares. ChrysCapital, managing almost $2.5 billion in assets, is open to selling shares at the "right price" either through a market trade or the open offer. Bankers have been in dialogue with the Indian private equity firm for an open market sale in the next few days, since regulations allow an acquirer a three-day window (post public announcement) to mop up shares from the market.

ChrysCapital declined to comment citing the sensitivity of the matter involved.

Some minority investors, including ChrysCapital, believe Baring's offer price does not reflect the bullish growth forecast of Hexaware, the profitability expansion in the wake of a falling rupee and almost $100 million sitting on the books of the company. "In context, Baring Asia's offer seems to undervalue the company," said a person who did not wish to be named since he is involved with the ongoing talks.

Hexaware shares closed at Rs 121, ahead of the Baring deal announced late Friday evening. Baring pegged the company below $650 million, or about Rs 4,000 crore, by market value, at the upper price band of Rs 135 per share.

ChrysCapital is likely to consider a market trade to offload at least a part stake if Hexaware stock rallies past Rs 140 per share, though it considers a price around Rs 150 per share a trigger point, added another source familiar with the developments . The fund, with an enviable track record in timing (or calling) the market, had built crucial positions in several front-line and Tier-II technology stocks like Infosys, HCL Technologies and Hexaware.

While it exited Infosys after doubling the value, ChrysCapital has held on to HCL Technologies shares which recently tested life-time highs. "IT and pharma are the two sectors that have good multiples in the current climate, and the offer on table for Hexaware (valued at about seven times operating profit) isn't the best deal possible ," said one of the sources cited earlier in the report.